Peer-to-peer (P2P) lending connects someone who wants to borrow money with an investor wanting to lend money. But there is much more to know, as you’ll find out in this guide to peer-to-peer lending in New Zealand.
P2P lending: An introduction
There are key things to take on board about peer-to-peer (P2P) lending in New Zealand and why it’s part of investors’ investment portfolios.
P2P lending is an attractive option for investors looking to earn higher returns than traditional savings accounts or term deposits. It’s also a great way to diversify your investment portfolio by spreading risk across a variety of loans and borrower types.
While it does carry a higher level of risk, the potential for better returns has made P2P lending an appealing choice for those who prefer a more hands-on approach to managing their investments. However, it’s worth keeping in mind that P2P lending should be viewed as a long-term strategy, as the money will be repaid over the term of the loan.
Five key things to know about P2P lending
If you’ve skipped to this section, let’s summarise some of the key facts about peer-to-peer lending.
1. Investors are paid a higher percentage with P2P lending than with traditional term deposits, while borrowers are often able to borrow at a lower interest rate than traditional bank terms.
2. Diversification is key to the best return on your investment. By investing in a variety of P2P loans, you protect your capital.
3. Investors need to think long term with P2P lending. Your money is invested for the term of the loan, and it is not always possible to withdraw it early.
4. Often, investors have the option of choosing which loans they’d like to fund. This allows individuals to align their investment with their risk tolerance.
5. It’s always wise to seek additional guidance, whether it be from the Financial Markets Authority or your own chosen independent financial advisor.
How does peer-to-peer lending compare with traditional lending?
One key difference between peer-to-peer lending and traditional lending is the elimination of the middleman. P2P lending connects investors directly with borrowers seeking funds. This often provides a better rate for both parties.
In traditional lending, banks absorb the default risk. With P2P lending, the investor takes on the risk if the borrower defaults. However, MoneyShop prides itself on having never defaulted on payments to an investor to date.
Flexibility is another difference between traditional and P2P lending. Traditional lending tends to have strict criteria and fixed terms, which can make it harder for some borrowers to qualify. Alternatively, P2P lending provides personalised options for borrowers while allowing investors to select loans that align with their risk tolerance. This creates a win-win situation, offering greater accessibility for borrowers and more control for investors.
How everyday Kiwis benefit from peer-to-peer lending
Peer-to-peer lending is an attractive option for Kiwis who may find an unsecured loan through a traditional bank too expensive. Or perhaps, they don’t meet the bank’s stringent funding requirements. Your investment can help MoneyShop fund unforeseen expenses for everyday Kiwis.
FAQ about P2P lending
You’ll find below a selection of frequently asked questions about peer-to-peer lending in New Zealand. If you have any P2P lending questions that are not below, please get in touch via the contact form lower down on this page and we’ll respond promptly.
Q. How are borrowers assessed?
MoneyShop evaluates borrower applications based on their ability to repay the loan. While we maintain high standards in our evaluation process, it is much more personalised than a traditional bank’s application.
Q. How are loans managed?
MoneyShop manages all the loans on our investors’ behalf. We take responsibility for recovering the payments, and you have no contact with the borrower.
Q. What types of borrowers does MoneyShop lend to?
Your investment funds personal loans for Kiwis such as car loans, emergency loans, or home repairs.
Q. What happens if a borrower defaults on their loan?
While peer-to-peer lending is not without risk, MoneyShop manages payment recovery for investors. We also pride ourselves on never having missed a payment to an investor to date.
Q. Is my investment guaranteed?
No, P2P investments are not guaranteed. However, by diversifying your investments across multiple loans and borrowers, you can reduce your overall risk.
Q. How can I get started with P2P investing in New Zealand?
Simply contact us through the form below, and we’ll walk you through the investment process and answer any additional questions you may have.
Investor opportunities in NZ with MoneyShop
Ready to get started with P2P investments? We’ll connect you with people seeking personal loans for you to fund. Feel good knowing that your investment is benefiting an everyday Kiwi.
Step 1: Add your details to the form to schedule a consultation with us.
Step 2: We’ll walk you through the P2P lending process and answer all your questions. You follow up with an independent financial advisor consultation, if desired.
Step 3: You determine the loans you’d like to spread your investment across.
